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The Determinants of Profitability of the Pharmaceutical Industry of Bangladesh: A Random Effect Analysis

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  • Md. Shahidul Islam
  • Muhammad Saifuddin Khan

Abstract

The present study investigates the factors affecting the profitability of the pharmaceutical industry of Bangladesh. Using the data of 20 listed pharmaceutical companies fully functional in Bangladesh, we found both the firm specific and the macroeconomic specific variables affect the profitability of the companies. A panel dataset of 10 years starting from 2007 to 2016, we ran the random effect regression. The regression output depicts that among the firm specific variables, sales, operating income, operating cost, return on equity and total liabilities have significant effect on the profitability of the companies. We also found that the GDP growth rate and the rate of inflation among the macroeconomic variables have significant deterministic role on the profitability. The regression results followed by recommendations will be a great help to the policy makers both from inside and outside of the corporations.

Suggested Citation

  • Md. Shahidul Islam & Muhammad Saifuddin Khan, 2019. "The Determinants of Profitability of the Pharmaceutical Industry of Bangladesh: A Random Effect Analysis," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(2), pages 68-74, April.
    • Handle: RePEc:jfr:ijfr11:v:10:y:2019:i:2:p:68-74
    DOI: 10.5430/ijfr.v10n2p68
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    References listed on IDEAS

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    1. Molyneux, Philip & Thornton, John, 1992. "Determinants of European bank profitability: A note," Journal of Banking & Finance, Elsevier, vol. 16(6), pages 1173-1178, December.
    2. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    3. Short, Brock K., 1979. "The relation between commercial bank profit rates and banking concentration in Canada, Western Europe, and Japan," Journal of Banking & Finance, Elsevier, vol. 3(3), pages 209-219, September.
    4. Smirlock, Michael, 1985. "Evidence on the (Non) Relationship between Concentration and Profitability in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(1), pages 69-83, February.
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    Cited by:

    1. Md. Habibur Rahman & Krishna Shaha, 2023. "Impact of Fundamental and Macroeconomic Factors on Stock Returns: A Study on Cement Industry in Bangladesh," International Journal of Science and Business, IJSAB International, vol. 28(1), pages 41-66.

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